Section R. 451.4.5 - Registration exemption for investment advisers to private fundsRule 4.5.
(1) This rule takes effect 365 days after the rule set has been filed with the secretary of state.(2) As used in this rule, "venture capital fund" means a private fund that meets the definition of a venture capital fund in SEC rule 203(l)-1, 17 C.F.R. § 275.203(l)-1.(3) Subject to the additional requirements of subrule (4) of this rule, a private fund adviser formed or domiciled in this state, and a private fund adviser not domiciled in this state but offering its fund securities to Michigan residents, is exempt from the registration requirements of section 403 of the act, MCL 451.2403, if the private fund adviser satisfies both of the following conditions: (a) Neither the private fund adviser nor any of its advisory affiliates are subject to a disqualification as described in SEC rule 506(d)(1) of SEC regulation D, 17 C.F.R. § 230.506(d)(1).(b) The private fund adviser files with the state each report, and amendments to each report if applicable, that an exempt reporting adviser is required to file with the SEC pursuant to SEC rule 204-4, 17 C.F.R. § 275.204-4.(4) In order to qualify for the exemption described in subrule (3) of this rule, a private fund adviser who advises at least one 3(c)(1) fund that is not a venture capital fund, shall, in addition to satisfying each of the conditions specified in subrule (3) of this rule, comply with all of the following requirements: (a) The private fund adviser shall advise only those 3(c)(1) funds, other than venture capital funds, whose outstanding securities, other than short-term paper, are beneficially owned entirely by persons who each meet the definition of a qualified client in SEC rule 205-3, 17 C.F.R. § 275.205-3, or an accredited investor in SEC rule 501, 17 C.F.R. § 230.501, at the time the securities are purchased from the issuer.(b) At the time of the purchase, the private fund adviser shall disclose all of the following in writing, to each beneficial owner of a 3(c)(1) fund that is not a venture capital fund: (i) All services, if any, to be provided to individual beneficial owners.(ii) All duties, if any, the investment adviser owes to the beneficial owners.(iii) Any other material information affecting the rights or responsibilities of the beneficial owners.(c) The private fund adviser shall obtain, on an annual basis, audited financial statements for each 3(c)(1) fund that is not a venture capital fund, and shall deliver a copy of such audited financial statements to each beneficial owner of the fund.(d) Subrule (4)(c) of this rule does not apply to a 3(c)(1) fund with respect to any annual period if both of the following are true: (i) Each beneficial owner is a qualified client.(ii) The private fund adviser has provided to each beneficial owner a written disclosure explaining that the private fund will not provide audited financial statements to investors annually, but that other similarly-situated funds may provide audited financial statements to their investors.(5) If a private fund adviser is registered with the SEC, the investment adviser shall not be eligible for the exemption in subrule (3) of this rule, and shall comply with the state notice filing requirements applicable to federal covered investment advisers in section 405 of the act, MCL 451.2405.(6) A person is exempt from the registration requirements of section 404 of the act, MCL 451.2404, if he or she is employed by, or associated with, an investment adviser that is exempt from registration in this state pursuant to this rule and does not otherwise act as an investment adviser representative outside of the scope of his or her employment.(7) The report filings described in subrule (3)(b) of this rule must be made electronically through the IARD. A report is deemed filed when the report is filed and accepted by the IARD on the states behalf.(8) An investment adviser who becomes ineligible for the exemption provided by this rule shall comply with all applicable laws and rules requiring registration or notice filing within 90 days from the date the investment advisers eligibility for this exemption ceases.(9) An investment adviser to a 3(c)(1) fund, other than a venture capital fund, that has 1 or more beneficial owners who are not qualified clients or accredited investors as described in subrule (4)(a) of this rule is eligible for the exemption contained in subrule (3) of this rule, if all of the following conditions are satisfied: (a) The subject fund existed prior to the effective date of this regulation.(b) As of the effective date of this rule, the subject fund ceases to accept beneficial owners who are not qualified clients or accredited investors, as described in subrule (4)(a) of this rule.(c) The investment adviser discloses, in writing, the information described in subrule (4)(b) of this rule to all beneficial owners of the fund.(d) As of the effective date of this rule, the investment adviser delivers financial statements as required by subrule (4)(c) of this rule, unless subrule (4)(d) applies to the private fund adviser.(10) Subrule (3)(a) of this rule does not apply upon a showing of good cause and without prejudice to any other action of the administrator, if the administrator determines that it is not necessary under the circumstances that an exemption be denied.Mich. Admin. Code R. 451.4.5